We’re happy to present our first trader interview based on questions from the Darwinex community. The interviewee is Hall of Fame current nº 2, HighFive.
HighFive is the manager of HFD, a DARWIN with a track record starting in September 2017 and with its underlying strategy trading at Darwinex since April 2018. In the words of HighFive, it is a…
Manual trading system based on margin zones of participants from the futures market. Additionally, I use market sentiment analysis, volume analysis (trade zones, options, futures contracts) and technical analysis. The average risk per trade is up to 2% of the deposit. Each trade is protected stop loss. I try to hold a stop ratio to a take profit 1 to 2 and above, behind an exception the short-term trading. Type of strategy is trend following after pullbacks. No martingale.
At the moment of writing, HFD has an AuM of more than $3.5M from more than 600 investors which makes it the DARWIN with most investors on the DARWIN Exchange. Some of those investors, and other community members, submitted the questions you can read below together with HighFive’s response to them.
Thank you all, both HighFive and community members who’ve sent questions! Enjoy!
Avera: When you created HFD, did you imagine it managing more than 3M? Now that you manage more than 3M, have you changed anything in your trading or thinking compared to when you started the strategy?
HighFive: When I created HFD I was just getting acquainted with Darwinex. Of course I couldn’t imagine how fast Darwin’s capitalization would grow at some point. As for trading and money management, I believe that the principle should be the same for any amount, whether it is on my account $ 1000 or with capital management of more than 3M. Throughout the time, the principle of trading remains the same, but some aspects are improved and refined. Currently, I am thinking about the inclusion of oil in trading. Thinking of course changes as you grow as a trader. I feel responsible in managing such capital. Long ago I realized that you do not need to chase profit. The ideal profit is 30-50% per year. You just need to work by your system carefully analyzing the market and think with your head. This year I improved risk management, reduced risks and tried to improve overall stability.
sergyy: How did you start trading? How were your beginnings as a trader?
HighFive: I have been mainly active trading since 2013. I have long been interested in financial direction and asset management. At that time, I was studying professional managers in the financial market and I saw great potential in this. Since 2014, I have tried different systems and methods in the market, looking for my direction, market vision and trading style. I had both ups and downs, but I did not despair, but tried to take into account my past mistakes. Since about 2016 I have been trading on personal accounts using the current strategy and I closed them with a profit in early 2018.
Manoj: What are tools which restrict or make caps as per user define eg. 5% used in mt4 though darwinex have their own system of 10% var. How as a trader do you manage risk management specially on loss to not go beyond 5% or control drawdawns as per your choice.
HighFive: I use the EA to automatically calculate the risk for each trade depending on the stop loss. Typical risk is 0.2%-1%. I analyze the market and work by the trading system, during the week or month can be a long series of stop losses. If in the current period trade deals are closed with a loss, just need to accept it and competently continue to work. I try to stick to risk management: 10% maximum drawdown per week and 20-25% maximum drawdown on the underlying strategy.
Jose Maria: My analysis of HFD’s return curve showns that after every drawdown, it recovers very fast. This makes me ask whether martingale techniques are applied. Do you use these techniques? If not, how can the described behaviour of the curve be explained?
HighFive: I’m not using martingale methods at the moment. At the beginning of the account creation more than a year ago, I used more aggressive trading methods and some elements of martingale with stop loss. There are strategies that one must avoid, like martingale, grid, hedging, averaging, arbitrage, etc. These are basic principles and I agree with them. However, my opinion is that with competent analysis and risk management, some elements of averaging in a small range can be applied. Sometimes I use some elements of averaging with a common stop, if a high-quality signal is formed for this and the position has a great potential. Sometimes it is in 10-15% of cases. If the market currently does not give the opportunity to open a deal using a pattern or other methods.
Husain1: Is there a possibility that you stop trading? Can someone who wants to invest in you for long term be comfortable that you will continue trading?
HighFive: I will definitely report on the community forum if I stop trading. There are currently no plans to stop trading in the near term. I trade while with me everything is good, if something changes I will definitely let you know.
Frip: It grabs my attention how fast you recover from drawdowns and get back to you regular ascending line. It happens in almost every drawdown independently from their magnitude. The one ocurring last September 11th stands out mightily. You recovered in just 2 days. Could you explain how you do this? Thank you and congratulations for your good work!
HighFive: Recovery from a drawdown is not always quick. For example, in April this year, the recovery was about 2 months. At the beginning of September this year, almost all instruments had a medium-term trend change, some of the inputs I incorrectly filtered, so Darwin was in a drawdown. I got a big stop loss on gold in long +-2%, then there was a series of stop losses on other instruments. In the second week of September, I held 2 positions on the GBPUSD in long and XAUUSD – shorts. Around September 11-13, there was a big movement in the market and and both deals closed at a good take profit and allowed Darwin to get out of the drawdown at 0. Because of the good stop-to-take ratio. September could well end with a drawdown of 7-10%…
Augusto: I would like to know if you use different timeframes or which timeframe do u prefer to operate normally. Thank you very much.
HighFive: Timeframe is a subjective concept. I am working on a compressed chart of the m15-m30 timeframe, this corresponds to the H1-H4 standard in mt4.
usiphatheleni: How many demo accounts do you run at any given moment?
HighFive: I don’t have any demo accounts at the moment.
usiphatheleni: Do you take breaks from trading and what’s the longest period you have taken?
HighFive: Trading breaks are usually 2 per year when I am on vacation. Usually it is for 2 weeks. The longest is probably during the New year Holidays from December 20 to January 10 in a period of low liquidity and uncertainty in the market.
Roshun: How do you find setup with positive expectancy in markets that keep changing?
HighFive: There are basic concepts such as trend, momentum, correction, flat. That never changes. There are statistics that the trend continues with a probability of 70%. The fundamental principles of the trading strategy have been tested for several years and have shown a positive expectation. I use different filters for different stages of the market. The basis of the positive expectations are rigorous risk management, perseverance, consistency and patience.
Roshun: How do you maintain or improve consistency in markets that are ever changing?
HighFive: I maintain consistency when analyzing to enter a position. 1) Identification of long – term and medium-term trend and technical picture of the market at the moment. 2) Analysis of certain data from the CME exchange and determination of the current trend according to trading system. 3) Analysis of market sentiment. 4) Search and analysis of expected patterns and formations in the market at the moment. 5) Risk calculation for the expected position. The fundamental principles of the trading strategy remain almost unchanged. However, I am changing and improving some filters based on my experience to improve consistency in changing markets. Also the psychological aspect is of great importance, especially for the manual trader. From my point of view, it is extremely important to have a comfortable risk management, in which losses will not affect further competent decision-making. So I try to maintain and improve self-discipline.
Roshun: You have a drawdown of 9.73% over a period of 3 years which is quite commendable. Can you elaborate on what trading process or practice has help you to achieve such a feat?
HighFive: Please note that the maximum historical drawdown on the underlying strategy was +-25%. At the time, HFD had a” VAR ” of about 25%, so Darwin got a maximum drawdown of 9.73%. I have now reduced the risks and am trying to maintain a “VAR” around 8-12%. The basis of the principles are rigorous risk management, perseverance, consistency and patience. I maintain and improve self-discipline. Analysis of past trades and possible mistakes is also important.
Roshun: When you are testing for an edge for a given setup, what is your trade management approach – is it an active or passive one? (Active TM means you managing the life of the trade as per actual market conditions – traders subjectivity might play a role in testing a setup edge. Passive TM means you either have a profitable or loss trade – no subjectivity while testing).
HighFive: First of all, I used the passive method of trade management. I tested the basic principles of the trading strategy on the history, also using the passive method. If I want to test a certain setting on history I also use the passive method. The active method here is difficult to use or even impossible, because some data is missing. If I want to test a particular setup in a real market scenario, I use the active method. The method of conducting a trade deal is determined by many factors. For example “after taking a position, the market is stalling too much does” I will not close the position if there is no reason for it and will hold the trade until stop loss or take. However, if there is a signal to stop the current trend, then I can adjust the position, partially or completely close or move to breakeven. For example, the change of market sentiment or the scrapping of the technical medium-term picture of the market. It is also possible to change the current trend according to the trading system, with open positions in the opposite direction. I agree that with an active method of trade management, subjectivity might play a small role in a testing setup. I think it’s part of risk management.
Spingalex: What are all the factors that guided you to be a manual trader and not an automatic trader?
HighFive: I initially traded manually, and then only tested some automatic strategies and methods. I’m not a professional programmer. My conclusion was that most of these systems only work in a certain interval in the market. For example, most impulse and breakout systems have been in a drawdown for the last 1-2 years and are just beginning to come out of it. I understand that there are professional algorithmic traders and they are constantly improving their system and have a positive expectation on the distance. I just like manual trading, I like to analyze the market and everything related to it. I am not sure that my trading can be fully automated. Of course, I would like to partially automate my trading to have more free time.
Alex: Have you studied or trained to be a trader? How / what were those studies or training programmes?
HighFive: I studied on my own (I’m self-taught). However, I am grateful to one experienced trader, in due time thanks to him I radically changed the approach to market analysis and risk management. The program is probably only a EA “manual strategy tester for MT4”. The most important thing is practice and trading on a real account.
Shivank: What book you will suggest to the traders who want to learn and understand market moves?
HighFive: There are many books and texts about trading but in my experience, beyond the most basic concepts, real knowledge can’t be obtained from book. First you need to study technical analysis. Practice and a systematic approach will allow you to understand the market movements. I would advise you to practice more on a real account and look for your trading style. Perhaps such books: “The Psychology of trading” by Brett N.Steenbarger, “Enhancing Trader Performance” and “Market Wizards” by Jack D.SCHWAGER”. But they’re more psychological.
yusifkunat: if it’s not a secret – what exactly are “margin zones of participants from the futures market”
HighFive: Margin zones on Forex are margin call levels established by the short-term (intraday) and medium-term requirements of the CME exchange, which relate to positions carried every other day. You can be found more detail at the CME exchange website.
yusifkunat: Interestingly, equity curve of HFD usually is trending up slowly with low fluctuation, but then sometimes huge spikes appear down and up in short time: can you tell the background of such sudden changes on “behaviour” of equity curve?
HighFive: This is due to the fact that the market changes periodically and sometimes there is a consecutive long series of stop losses. At the same time, several good deals closed on take profit with a good stop-to-take ratio allow Darwin to get out of the drawdown.
bianka: Are you yourself investing in your own or other DARWINs? If yes, how have you done so far as an investor?
HighFive: I invest in other Darwins, but relatively recently, about six months ago. I made some profit. At the moment, the result is about zero. Darwinex is a great investment platform, but I don’t have enough time to fully analyze other Darwins.
What do you think about this way of featuring traders? Any suggestions for improvement? Any particular trader you’d like us to interview?